Ohio Ct Stays Homeowners’ Class Action Lawsuit and Orders Arbitration of Construction Defect Claims

Ohio Appellate Court decision (June 18, 2015)

Homeowners filed a class action lawsuit against a builder seeking damages for alleged design defects in their homes relating to the roofing systems. The homeowners contended that the defects resulted in serious water intrusion, structural damage to their homes and consequential black mold growth. The builder sought a stay of the class action lawsuit pending arbitration in accordance with provisions that were contained in the purchase agreement and the limited warranty provisions contained therein  which required claims to be submitted to binding arbitration. The homeowners sought to prevent arbitration of their claims on the basis that: (i) the warranty provisions in the contract documents were both substantively and procedurally unconscionable; and (ii) their claims were not subject to arbitration.

The trial court granted the builder’s motion to stay the class action lawsuit pending arbitration of the homeowners’ claims, finding that there was no showing of unconscionability in the arbitration clauses that would justify non-enforcement, and  Ohio law favors arbitration as a more expedient and cost effective means of resolving disputes . The homeowners appealed the trial court decision.

The appellate court stated that: (i) under applicable law, an arbitration agreement contained in a written agreement is valid, irrevocable, and enforceable so long as there are no grounds in law or equity for revocation of the contract;  (ii) arbitration provisions in contracts that are determined to be “unconscionable” will be unenforceable;  (iii) any doubts regarding arbitration should be resolved in its favor; (iv) substantive unconscionability requires a determination of whether the contract terms are commercially reasonable in the context of the transaction involved; and (v) procedural unconscionability involves factors bearing on the relative bargaining position of the parties such as age, education, intelligence, business acumen and experience, etc. The appellate court concluded that, based on the facts contained in the record on appeal, there was no merit to the homeowners’ contentions and the trial court judgment was affirmed.

See case decision: Vasil_v._Pulte_Homes_of_Ohio (1)